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Retirees tend to be asset rich and relatively
income poor.
Those aged 25 to 34 are over represented
among middle and upper income groups. This
reflects higher incomes associated with greater
workforce experience and higher rates of
partnering.
People aged 35 to 44 are also over represented
in middle and upper income groups, but less so
than those aged 25 to 34. This reflects parents
having children and taking time out of the
workforce.
Those aged 45 to 54, and even more so those
aged 55 to 64, are over represented among the
top income deciles. This reflects parents returning
to the workforce, workers moving through their
peak earning years and savers benefiting from
income associated with capital accumulation.
People aged 65 and older are strongly over
represented in lower income deciles. This reflects
retirement from the workforce, reliance on
the age pension and drawing down savings to
support consumption. However, once the benefits
flowing from home ownership are factored in, the
overall position of those over 65 looks quite a bit
better.
During working age years there is also
movement up and down the income distribution
but much less so in traditional retirement ages.
On average, each person spent time in five
different income deciles between 2000-01 and
2015-16. Close to 90 per cent had a difference of
at least three deciles between the top and bottom
income deciles they spent time in. Less than
1 per cent of people remained in the same
income decile over the whole period.
As I have previously stated, this income mobility
means that projections of tax expenditures
on superannuation by income decile of the
population are likely to be extremely misleading
when calculated over a period of 30 years or
more. Projections for the top income percentile
are even more misleading. Both the Treasury and
the Grattan Institute could do well reading the PC
research report.
Retirement income mobility is much less
common, at least in terms of upward mobility.
Not many people aged over 80 win a lottery or
inherit big from their parents.
Rates of measured income poverty are
also relatively high. Over 10 per cent of
retiree households were estimated to be in
poverty in 2015-16 based on their level of
private consumption relative to the rest of the
community. Retirees experience higher poverty
levels than working households, but less than
unemployed households, reflecting a combination
of superannuation income and the higher rates
of the Age Pension compared to the Newstart
Allowance.
Having a decent superannuation balance
in retirement is an important safeguard
against ending up in poverty. Compulsory
superannuation is clearly a socially progressive
policy.
Superfunds October 2018